Faw Casson

50+? Make up for lost deductions.

December 18, 2018

Did you rely heavily on the many itemized deductions that the Tax Cuts and Job Act (TCJA) has eliminated or reduced?  If you are still trying to find viable solutions to continue to benefit from itemization, making a “catch-up” contribution to your retirement account could be a particularly advantageous option for you. A catch-up contribution is an additional contribution for persons nearing retirement, above the annual amount allowed by certain retirement accounts. 
First, in order to be eligible and fully benefit from making a catch up contribution you must be at least 50 years old by December 31st, still working and typically contributing the regular annual limit, and have sufficient earned income to contribute more.
2018 Contribution Limits
For individuals 50 years or older the 2018 401(k) contribution limit is $18,500, and the additional contribution amount allowed is $6,000 for a total amount of $24,000. For SIMPLE plans the regular contribution is limited to $12,500 and the catch up contribution amount is $3,000 for a total amount of $15,500. However, be sure to check with your employer because while most 401(k) and SIMPLE plans offer catch-up contributions there are some that do not. Catch up plans are also available for IRAs but deductibility depends on your income, and whether you or your spouse participates in an employer sponsored retirement plan.
Catch up contributions are a simple and effective way to make up for lost itemized deductions with the bonus of adding to your retirement savings and potential tax-deferred growth.
If you think you could benefit from making a catch up contribution or if you have any questions regarding the changes to itemized deductions please contact our office.

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